Standstill Agreement Mezzanine

From the point of view of the former lender, the previous lender, if it is late, wants to have control and not that the subordinated lender or anyone else, including the issue, dictate the enforcement actions taken. The former lender therefore requires a status quo agreement from the subordinate lender. Suppose a business has a line of credit when it already has a long-term loan from a bank. This line of credit includes an agreement or subordination clause as part of the loan supporting documents. In the event of a default, the long-term lender is initially entitled to assets; The Equity Line lender has a second right. If a company obtains another loan against its existing guarantees, it will convince the first lender to submit to the new loan, or receive a new loan subordinated to the first. In both scenarios, lenders use a subordinate agreement to outline the terms and conditions between them. Some high-level lenders may include a non-status quo clause or a clause protecting their interests. If this is the time, the resulting agreements are called subordination and status quo agreements. The debtor company will be a party, with operating subsidiaries holding valuable assets or at risk of violating a formal procedure or its financial obligations, as well as, as a general rule, the ultimate parent company. Other parties will be creditors and other stakeholders essential to the success of the business, for example.B.

key customers, suppliers (if the entity is a critical customer, useful concessions can be obtained) and the pension manager/regulator (if there is a significant pension deficit). Whoever has a place at the negotiating table (and who should be involved in the impasse) depends on where the value should be broken (see practical note: where value breaks and bargaining force). Companies with complex layers of debt have several classes of creditors with conflicting motivations. Understanding their positions is the key. For example, record initial lenders, who acquire debt at face value, may have a history of supporting the business, while secondary debt sellers who acquire debts less than one percent often seek a loan to Kym Stasiuk, is a partner in the McMurtry Blaney practice group that specializes in real estate finance transactions. Kym is active for both private and institutional lenders and developers and has extensive experience in preparing and negotiating credit and security documents for a wide range of transactions, including acquisitions, development/construction credits, refinancings, mezzanine/subordinated financings and related inter-creditor agreements. Whether or not the previous lender makes any compromise on the true status quo agreement depends, among other things, on the nature of the subordinated loan.